Financial Management Fundamentals Essay Example | Topics and Well Written Essays - 1500 words

Financial Management Fundamentals - Essay Example The company may face problems in meeting its short term obligations. The company has not raised long term debts and its long term liability is only pension liability. Accordingly the company is very low geared. Earning per share and dividend per share are so attractive that company will get oversubscribed whenever the company will go public. The detailed financial analysis follows: Profitability of Nichols Plc. have been analyzed from three angles, namely, Net Margins, Return on Assets(ROA) , and Return on Equity (ROE). Financial statements for Nichols Plc. have presented the profitability for 2006 (and restated figures for 2005) before and after taking into account exceptional items. Accordingly the profitability analysis have been made from both angles, i.e., before and after the exceptional effects on profitability. The following ratio calculations have helped in reaching an investigative analysis: Net profit margin â€Å"also called the Return on sales ratio, it shows after tax profit(net income) generated by each sales dollar by measuring the percentage of sales revenue retained by the company after operating expenses, creditor interest expenses, and income taxed have been paid.†(BDC)1. Net Profit Margins have shown a tremendous jump from 7.37 % to 10.01 despite the fact the sales revenue has been reduced from 63.336m in 2005 to 52.296m in current year 2006. That means Nichols has worked on some strategic issues and kept the qualitative business alive that generates the real profits for the company. This fact is clearer when a reference is made net profit margins after the exceptional adjustments; the increase in net margin is by huge 5.54%. Also the Chairman’s Statement makes the issue of profitability absolutely clear when it states that, â€Å"the progress made in underlying profitability is actually much greater than the headline figures suggest, due to di storting effects of Balmorals disposals completed in January 2006.† As